Will Parrikar clear single-tender Avro replacement bid?

Bengaluru, Nov. 13: All eyes are on India's new Defence Minister Manohar Parrikar, who is set to chair his first Defence Acquisition Council (DAC) meeting in New Delhi on November 22.

Among the crucial decisions to be taken by Parrikar, the 13,000-crore ‘private sector only' Avro replacement project initiated by the UPA-2 regime would be the most-awaited one.

Aimed at encouraging the private sector to take major lead in India's aerospace and defence programmes, the project envisages the delivery of 56 medium transport aircraft to the Indian Air Force (IAF), under the ‘Buy and Make' category.

First-time experiment runs into rough weather

The decision to keep PSUs like aviation major Hindustan Aeronautics Ltd (HAL) at bay from the tendering process has already ran into trouble. The tender was issued during A K Antony's regime in May 2013 and was strongly opposed by some of his Cabinet colleagues as well.

The tender had sought foreign OEMs (Original Equipment Manufacturers) to identify an Indian partner other than HAL, to supply 16 aircraft from their original facilities and provide ToT (Transfer of Technology) for manufacturing the remaining 40 aircraft by the Indian partner.

As per the tender, foreign OEM would remain as the main contractor and the Indian partner would only remain as a vendor. The contract, when finalised, will be signed between the OEM and the IAF. The tender has so far been extended several times with the foreign OEMs failing to identify a capable Indian partner.

Finally, the Tata-Airbus consortium (Airbus Defence & Space and Tata Advanced Systems) now remain as the single vendor, offering the Airbus C295 as a replacement to the Avros.

‘Make in India' campaign in focus

Sources tell OneIndia that DAC can overlook the rulebook taking into account the ‘existing exceptional situation.'

If Parrikar uses this ‘special route' to bring in the Airbus C295, it might be seen as a deviation from Prime Minister Narendra Modi's strong ‘Make in India' pitch. However, those supporting Airbus C295 would argue that a major work share will be done in India thereby fulfilling PM's Make in India dream.

An official who was part of many mega procurements for Indian Navy told OneIndia that the government should back what the Services want. "There have been many instances of single-tender deals in the past as well and all such platforms have performed very well. We cannot have the Avro replacement go the Navy's mine-sweeper way. The IAF has gone by its wisdom and the nation should back it," says the official not wanting to be named.

Choose independent directors carefully, MoD told

A top Ministry of Defence (MOD) official confirmed to OneIndia that many representations have come from various DPSUs asking the government to have a ‘re-look' at the policy of nominating independent directors to their Boards.

The presence of Ratan Tata on HAL Board (two terms for 5 years) is likely to throw up a row, if the Tata-Airbus consortium wins the deal. HAL feels that Tata was privy to all important information about the Company's policies, which might have given him an edge while diversifying into aviation. "The government has been asked to review the policy of appoint of independent directors to the PSU Boards," the official said, not wanting to give more details.

We should be allowed to compete, says HAL

Sources within HAL said that the Avro replacement programme is a ‘tailor-made opportunity' for the Company. "We feel that it should come to us on a nomination basis. If that is ruled out, then we should be allowed to compete. We need to play the role of a leader with our expertise and take Indian private companies along as partners," an HAL official said.

HAL feels that the Company can help build a robust aerospace eco system by partnering with private industry.

"We have a separate facility in Kanpur (Transport Aircraft Division) which has been developed for manufacturing Avros and later for Dorniers. Proven facilities and available skill should be put to use for aerospace projects. Those against HAL are saying that our order book is full," the official said. HAL Chairman R K Tyagi refused to comment and didn't reply to email queries sent by OneIndia.

Future bids will be different, says expert

Air Marshal M Matheswaran (Retd), former Deputy Chief of the Integrated Defence Staff (Policy, Planning and Development) and currently an Advisor to HAL, says that the government should not think of re-tendering the project.

"We cannot go back and it will hit the eco system as well. In this case, the single-tender scenario is not a pre-designed one and everyone was given a fair chance to participate. This is an ideal opportunity for the private sector to get into the real meat of an aircraft manufacturing programme," Matheswaran said.

He said in future, HAL will be part of every tender that will be called for. "No other programmes can exclude HAL in future. HAL will compete along with other partners. Consortiums will be encouraged. I feel in the interest of the nation, IAF and industry there should not be any more delays," Matheswaran said.

Defence Acquisition Council (DAC)

The DAC was set up in October 2001 following recommendations from Group of Ministers (GoMs) on ‘Reforming the National Security System.' The need for DAC was felt post-Kargil conflict and this high-level body is chaired by the Defence Minister.

Other members include: Minister of State for Defence, Chief of Army Staff, Chief of Naval Staff, Chief of Air Staff, Defence Secretary, Secretary Defence Research & Development, Secretary Defence Production, Chief of Integrated Staff Committees (HQ IDS), Director General (Acquisition) and Deputy Chief of Integrated Defence Staff. The main aim of the DAC is to fast-track procurement process of the armed forces by optimally utilising the available budget.

(The writer is a seasoned aerospace and defence journalist in India. He is the Consultant Editor (Defence) with OneIndia. He tweets @writetake.)